Nike recently announced some significant changes coming over the next five years, as it seeks to realign its brand with its ambitious revenue goals in the changing face of the sportswear retail market. When the brand first announced its goal to reach $50 billion in sales by 2022, the year was 2015 and many of the large players in the sports market still remained. But since that time, The Sports Authority and City Sports have both closed their doors, and sportswear sales across the industry have slowed.
To combat these retail pressures, Nike is implementing two bold strategies. First, the brand will take steps to limit itself to only 40 key retail partnerships. Although it will not discontinue existing accounts, with the more than 30,000 retailers that currently sell its products, the brand will actively shift its focus over the next five years, to emphasize those key retailers that appear poised to grow, even in the tough modern retail market. Nike explains the move by noting that many other retailers that sell its apparel are “undifferentiated and mediocre,” such that they are unlikely to survive much longer. With this key retailer strategy, the brand will expand its online partnership with Amazon, while also maintaining its products in several well-established brick-and-mortar locations, such as Foot Locker.
Second, the brand also hopes to meet its revenue goals through a focused expansion of its direct sales platform, Nike.com. With more than 100 million members already, Nike.com continues to seek ways to lure even more consumers to register for its service offerings. For example, it promises limited release of specific sportswear items to members. It also works to engage consumers by offering customized experiences through its digital application. By focusing more on its own direct sales platform, Nike hopes to insulate itself further against some of the market disruptions and pressures that can result when a retailer declares bankruptcy or significantly restructures its business model.
- Why is Nike limiting the number of retailers it sells to?
- Is this strategy good or bad for Nike? What about retailers?
Source: Sara Germano, “Nike Tells Investors It Will Shift Away from ‘Mediocre’ Retailers,” The Wall Street Journal, October 25, 2017; George Anderson, “Nike Turns Its Back On ‘Undiﬀerentiated, Mediocre’ Retailers,” Retail Wire, October 26, 2017